10 hours ago
Sheryl Palmer Loves Her Customers & Team—Shareholders Love Her Results
Taylor Morrison Chairman and CEO Sheryl Palmer brought love into the company's conversations. Her ... More team liked it so much they gifted her a Teddy Bear with the slogan.
Whenever I talk to business leaders about the power of multi-stakeholder capitalism, I find it essential to share examples of executives who live by those principles. One of my favorites is Sheryl Palmer, the Chairman and CEO of Taylor Morrison (NYSE: TMHC), a leading national homebuilder and real estate developer based in Scottsdale, Arizona. Her track record proves that acting with sincere care for the best interests of customers, employees, and the wider community ultimately pays off for companies and their investors.
Since 2007, Sheryl has led Taylor Morrison's expansion to its current total of 21 homebuilding markets in 12 states, through a blend of organic growth and acquisitions. The company has thrived despite major challenges such as the Great Recession of 2008, the Covid pandemic, and rising interest rates. This year Taylor Morrison was named America's Most Trusted Home Builder for the tenth consecutive year, according to Lifestory Research. It was also recognized by Forbes as one of the most trusted companies in America and by U.S. News & World Report as a 'Best Company to Work For' — among many other accolades. As for the bottom line — in 2024 Taylor Morrison built 12,896 new homes and drove $8.2 billion in revenue, with adjusted net income of $931 million.
Sheryl graciously sat for an interview with me about how Taylor Morrison practices multi-stakeholder capitalism in a tough and very competitive industry.
Let's start with how you think about your customers. Is there a core principle that guides you?
We like to say we're a community builder first and a home builder second. There's a real hunger for community in this country, in addition to the hunger for more plentiful housing options. We see our mission as providing both.
Most of our construction projects are new neighborhood developments, around 150 lots, along with the streets and other public spaces. It's a big responsibility, because the choices we make about community design will affect the quality of life of future residents for decades.
This long-term responsibility means we need to focus on sustainability. When we build a new community, I want to come back and visit it in 20 years and I want to see it thriving. That's one reason we have an official relationship with the National Wildlife Foundation, to help us look out for local species of plants, butterflies and other natural elements. We're the only major builder that plans this way for the longevity of our communities.
How did your 'Love the Customer' initiative get started?
About every 18 to 24 months, I travel to every market where we build homes, so I can connect face-to-face with every team member nationwide. During one of those road shows, I happened to come up with a simple slogan: 'Love the Customer.' That may not sound groundbreaking, but in the construction industry no one uses the word 'love.'
People responded so well to the phrase that we started to incorporating it into all of our internal communications. My team even got me a teddy bear with 'Love the Customer' on his t-shirt. I keep him in my office to remind me at all times to think about our customers.
What does loving the customer look like in practice?
Lots of employees email me examples, and I love to read some aloud at meetings. Highlighting those stories helps us reinforce this idea as a core value of Taylor Morrison.
One of my favorite stories came from a builder who got really close to a young family while he was overseeing their first house. The wife was pregnant with the couple's first child. Our builder pulled the husband aside and quietly asked if they knew what they were having, because he could paint the nursery pink or blue at no extra charge.
That gesture didn't require a lot of effort or cost. But it had a huge impact. When the wife did her walk-through inspection just before the closing, she was surprised and delighted to see that the baby's room was already pink. After that, she wasn't just a satisfied customer but a Taylor Morrison fan.
Another great story involved a builder working with a family whose four-year-old daughter was fighting leukemia. He got to know the parents and the girl because they often visited the construction site. He found out that her biggest dream was to go to a Disney theme park, but she was forbidden because her weak immune system couldn't tolerate crowds.
The builder, who happened to live in the same community, took the initiative to knock on the doors of every house in the neighborhood, plus local businesses, the police department and the fire department. He asked everyone to join a Disney-style parade on a chosen date, dressed up like their favorite Disney characters. The parents had the girl sit on her front lawn in a beach chair while her neighbors marched past in a parade. It was an incredible, joyful moment. Local news covered the parade, which generated some publicity, but that wasn't the goal. The builder was just loving his customer and he felt empowered to go the extra mile. It was like a tonic for the community that lingered for years.
Did you get any internal pushback to 'Love the Customer"?
Not everyone at the company embraced the idea at first, because our industry has a tradition of strict separation of roles. The mindset used to be that the sales team did all the interactions with customers, and construction managers didn't have to waste any time dealing with them. It was like a 15-foot wall between those departments.
But we've been fighting that old-school mindset for a long time. Our builders personally demonstrate the house at the framing stage. They do a walk-through with each customer before closing, where they confirm that all the details in the contract are in place. We've found that this kind of interaction really pays off. They can bond with their customers instead of seeing them as a pain in the neck.
It sounds like your attitude toward customers is closely tied to your attitude toward your people.
Definitely. Too many CEOs and executives still look at labor as the biggest cost on their P&L statement, not as an asset. They don't understand that productivity is the key to any business's success, and treating employees well increases long term productivity. It seems so obvious, yet so many people don't get it.
When I worked in advertising in my twenties, people were always the first thing cut during a downturn or any kind of cash crunch. There was no thought about what damage those layoffs would do when the cycle turned and we needed more staff again. I learned that the way you act at the bottom of a business cycle affects how strong you'll be when better days return.
When I became CEO in 2007, just after the merger of Morrison Homes Inc. and Taylor Woodrow Inc., we had just under 2100 team members. The following year, the financial crisis hit our industry especially hard, and we had to reduce our headcount to a low of about 630 people. That was a horrible, painful process, but we tried to do it with respect and compassion.
FILE - In this April 10, 2018 file photo, Taylor Morrison Chairman, President and CEO Sheryl Palmer, ... More in white at center, joins applause as she rings the New York Stock Exchange opening bell, to celebrate their fifth anniversary of listing. (AP Photo/Richard Drew, File)
Like most of our competitors, we didn't fully start to recover until 2011. But unlike our competitors, we found that about 65% of our new hires were former employees who we'd had to let go during the crash. So we must have made an impression by doing layoffs humanely, or else they wouldn't have come back. And now they were helping us grow and thrive again.
That was a major aha moment. It validated my core belief that in good and bad times alike, it really matters how you treat people.
Is it hard to spread this kind of employee culture when you do acquisitions?
Acquisitions are a challenging way to grow because you're asking people to suddenly accept that they have a new management team and a new culture. Before you close a deal, due diligence can give you lots of information about the land and other assets you're acquiring, but the people involved are a big question mark. You can't even talk to potential new employees until the deal is announced, due to disclosure laws.
We've done eight deals since I became CEO, two of them with other public companies. After each deal I immediately do a road show to the offices of the new acquisition, along with my senior executive team. I believe that you have to go in person during this kind of situation — you can't just send a memo or do a video hookup.
If the new company is in a market where we don't have a current presence, like the one we bought last year in Indianapolis, I start by telling folks that we need them and want them to stay. I ask them to keep an open mind as we explain what Taylor Morrison stands for and what we're going to be able to do together.
If it's a market where we already have management teams, most people understand that we have to reduce overlap to make the math work. But I stress that I assume everybody is qualified until proven otherwise, and we're not going to automatically keep everyone from Taylor Morrison and fire their counterparts. Instead, we're going to interview everybody and combine the best of both groups, with a fair process.
We closed the biggest acquisition of my career, for a $2 billion company, just a couple of weeks before Covid hit in 2020. We suddenly had 800 new team members who were stuck at home before they could even get to know their new colleagues or systems. In some parts of the country, we were also required to shut down our sales offices and not meet with customers.
Fortunately, we had the flexibility to adapt and begin the integration process remotely, via phone trees and zoom meetings. We also created a process for doing virtual online tours, making us the first builder to take reservations and deposits online for new construction. That option is still available to this day, and you'd be surprised at how many people buy a house remotely after just seeing a virtual tour.
How does your approach to employees influence compensation?
The ultimate strategy for empowerment is making everyone a co-owner. Whenever employees own stock, it changes the way they think about their impact on the overall health of the company. It ties every decision they make to their own financial future.
So, earlier this year we decided to launch a major employee ownership program. Instead of just 150 leaders getting equity, we granted shares to our entire workforce of about 3300, as part of their compensation.
When the plan was announced, my inbox exploded with hundreds of thank you emails. I replied to all of them. I especially appreciated the folks who recognized that in a tough business climate, selling houses is not as easy as it was a few years ago. They realized that we didn't have to invest in our people this way, but we chose to.
How do you deal with diversity, especially now that DEI is so controversial?
The simple fact is that our customers have become increasingly diverse. Earlier in my career, about 70% of our home buyers were Caucasian, and now it's down to about 35%. So we have a clear business reason to hire people who understand our diverse customers. Changing demographics affect how we buy land, how we design communities, and how we market various amenities in our houses.
For instance, Indian American families often want a separate entry leading to a space with a bedroom, bathroom, and kitchenette. They use that space for elderly parents who want some privacy while living with their kids and grandkids. Other kinds of customers want a similar space for adult children who need to live with them because of affordability challenges. So we need to stay aware as our customers' needs keep changing.
One initiative I'm very proud of is the Taylor Morrison Board Fellows program, which we launched in 2022 to bring more diverse perspectives to our board of directors. We recruit leaders from all communities, who have unbelievably strong resumes, but have never had the chance to serve on or even observe a board. We give them a two-year paid fellowship to attend and participate in board meetings. They receive the same documents as our actual board members — the only thing they can't do is vote.
These fellows have been extremely helpful because they see situations in ways the rest of us might miss, especially the consumer shifts I just mentioned. So having their experience and perspectives in our boardroom isn't charity — it's intelligence gathering. They add so much value.
How has the financial community reacted to your multi-stakeholder initiatives?
Early in my journey as CEO, I was reluctant to talk about our approach to stakeholders, knowing that Wall Street only cares about financial results. I didn't want to be seen as having a 'female' leadership style. Then we started delivering great results and winning Most Trusted Home Builder in America, year after year. So I started to sprinkle in more details about what we do to care for our people and love our customers. And the financial community started to appreciate those efforts — as long as we continue to hit our financial targets.
A few years ago, during one of our quarterly investor calls, the collective light bulb really went off. Analysts started asking more questions about the intangibles that make Taylor Morrison different from our competitors. On my most recent investor call, I probably spent 20% of the time talking about how we're building communities, as opposed to just our metrics.
Any final thoughts for leaders and aspiring leaders?
I believe leadership is about being accessible, approachable, and authentic. You need to communicate in every way possible. So in addition to email and my road shows around the country, I do an internal video blog called "Shoes Off with Sheryl' because I like to get comfortable and kick my shoes off under the table. I offer straight talk about the state of our company and industry, as well as our strategy going forward.
During a recent recording of 'Shoes Off with Sheryl,' I spoke about the results from our most recent employee engagement survey. They were great, but I noted that in an uncertain economy we can't take anything for granted. And we can never lose sight of the importance of treating everyone the right way. It's easy to forget this when we get stressed out. But we can't let adversity change the way we treat each other or the way we treat our customers.
I believe in what's called The No Asshole Rule, after the book by Robert Sutton. Doing the right thing in every situation is our goal, and we don't tolerate bad behavior. But showing integrity and honesty are not the same as being soft or avoiding hard conversations or hard decisions. It just means treating everyone with respect.
If you practice doing the right thing in every relationship, it starts to become automatic. And when you do the right thing for the right reasons, it almost always ends up helping the company as well.
